The Advantage of Competitive Federalism for Securities Regulation

Romano argues that the production of U.S. securities law should be subject to the same market forces that produce U.S. corporate law. She questions fundamental beliefs regarding the efficacy of present-day securities regulation and calls for opening U.S. securities regulation up to competition. Romano charges that the current legislative approach to securities regulation is profoundly mistaken and that preemption is not the solution to frivolous lawsuits or the cost of compliance with multiple registration regimes. She advocates instead a market-oriented approach to competitive federalism that would expand, not reduce the role of the states in securities regulation. Under this approach, which is based on corporate law, corporations would be able to select their securities regime from among those offered by the states, the Securities and Exchange Commission, and even other nations, with the result that there would be competition among securities regulators for firms' registrations. The market approach would thereby fundamentally reconceptualize the regulatory approach to securities regulation. Romano's proposal is at odds with both sides of the current debate over the 1995 Reform Ac